3rd Annual AT Tax Time Thread

[CPA]

Originally posted by: brtspears2
I bought a home in November. I'm currently renting out a room in my home. How do I count this income? What kind of depreciation deductions can I take for renting this room out?

Also, if I paid a corrected property tax bill which is due Jan 2006, but paid it this month, could I deduct the payment?

you itemize the taxes paid in the year they are paid, not due. Individuals are deemed cash basis taxpayers, so it's generally (mortgage interest and IRAs are treated differently) taken in the year paid.

Rental Income and expenses - Schedule C. Homes don't generally depreciate, the appreciate. But you can take interest, taxes, maintenance as deductions.

 

[CPA]

Originally posted by: gordita
Question:

my wife got laid off last month and her previous employer sent her a letter stating she has about $2900 in her 401k account which she should take a lump sum payment to either a) self or b) rollover.
I've decided to rollover to a new traditional IRA with my discount brokerage.
so far so good.

now, she currently is taking a single grad level course at a university which is very much accredited.
the bill for that course is $3000.
I understand that with IRA's, I don't have to pay the 10% early distribution penalty if I use the $$$ for higher education.
so, as soon as the rollover is complete, can I withdraw all the IRA money and pay for this tuition?

I do understand that I will owe uncle Sam the fed and state taxes on the $2900 that I withdraw, but this will be when I file the 2006 return in 2007, which I am fine with.

the main question is, how do I show the IRS that I indeed used the distribution to pay for the tuition, assuming I'm going to give the university a personal check.

I would call my cpa but he is abroad on a 3-week holiday!!
any help would be greatly appreciated!

On line 2 of form 5329, you will enter the amount that will be excluded (the whole amount in your case), Also you will enter an exemption number (08 in your case). You shouldn't have to do anything else.

 

[CPA]

ps. where is my sticky?

 

[gordita]

Thanks for the prompt reply cpa.
are all my assumptions correct as far as rolling it over to an IRA and using that money to pay for a single grad course and this being exempted from the 10% penalty rule?
thanks

Originally posted by: CPA

Originally posted by: gordita
Question:

my wife got laid off last month and her previous employer sent her a letter stating she has about $2900 in her 401k account which she should take a lump sum payment to either a) self or b) rollover.
I've decided to rollover to a new traditional IRA with my discount brokerage.
so far so good.

now, she currently is taking a single grad level course at a university which is very much accredited.
the bill for that course is $3000.
I understand that with IRA's, I don't have to pay the 10% early distribution penalty if I use the $$$ for higher education.
so, as soon as the rollover is complete, can I withdraw all the IRA money and pay for this tuition?

I do understand that I will owe uncle Sam the fed and state taxes on the $2900 that I withdraw, but this will be when I file the 2006 return in 2007, which I am fine with.

the main question is, how do I show the IRS that I indeed used the distribution to pay for the tuition, assuming I'm going to give the university a personal check.

I would call my cpa but he is abroad on a 3-week holiday!!
any help would be greatly appreciated!

On line 2 of form 5329, you will enter the amount that will be excluded (the whole amount in your case), Also you will enter an exemption number (08 in your case). You shouldn't have to do anything else.

 

[DVK916]

Keep in mind people just because someone is a CPA doesn't mean they have any tax knowlege.

 

[Mayfriday0529]

Not sure if this is Federal or State.

Went back to school this year, I remember a few years ago i would get credit for any money i spent on school ( up to $2000). Is that still the case, even if you are 25 years old. I work full time and go to school full time.

 

[Accipiter22]

OK, so at the beginning of the year I calculated my taxes out based on an assumption of how much I would earn over the course of the year. I didn't want the gov't holding any of it, so I claimed '2' and as such if I had kept the position I was in, I would've owed about $95 in taxes at the end of the year. However I did not keep the job. Over the course of this year I did about 2/3s regular w-2 work, and about 1/3 contracting, 1099 work.. Now my total Gross for the two combined will be less than my beginning of the year estimate.

My question is this: Since I grossed less than I should've over the course of the year, I overpaid for taxes on the 2/3's of my wages that were w-2 based. Will this help assuage the ammount I have to pay on the 1/3 that was contract labor, and was thus untaxed?

 

[gordita]

yes, they still have the hope credit and the lifetime learning credit...I forget the difference between the two...

 

[CPA]

Originally posted by: gordita
Thanks for the prompt reply cpa.
are all my assumptions correct as far as rolling it over to an IRA and using that money to pay for a single grad course and this being exempted from the 10% penalty rule?
thanks

Originally posted by: CPA

Originally posted by: gordita
Question:

my wife got laid off last month and her previous employer sent her a letter stating she has about $2900 in her 401k account which she should take a lump sum payment to either a) self or b) rollover.
I've decided to rollover to a new traditional IRA with my discount brokerage.
so far so good.

now, she currently is taking a single grad level course at a university which is very much accredited.
the bill for that course is $3000.
I understand that with IRA's, I don't have to pay the 10% early distribution penalty if I use the $$$ for higher education.
so, as soon as the rollover is complete, can I withdraw all the IRA money and pay for this tuition?

I do understand that I will owe uncle Sam the fed and state taxes on the $2900 that I withdraw, but this will be when I file the 2006 return in 2007, which I am fine with.

the main question is, how do I show the IRS that I indeed used the distribution to pay for the tuition, assuming I'm going to give the university a personal check.

I would call my cpa but he is abroad on a 3-week holiday!!
any help would be greatly appreciated!

On line 2 of form 5329, you will enter the amount that will be excluded (the whole amount in your case), Also you will enter an exemption number (08 in your case). You shouldn't have to do anything else.

yes, when you fill out the form as I outlined.

 

[CPA]

Originally posted by: DVK916
Keep in mind people just because someone is a CPA doesn't mean they have any tax knowlege.

You obviously did not read this part of the OP:

Start any arguments between the current system, flat tax, national sales tax or any other tax opinion. The thread is to help people, not debate, flame or troll.

a$$hat.

 

[DVK916]

Originally posted by: CPA

Originally posted by: DVK916
Keep in mind people just because someone is a CPA doesn't mean they have any tax knowlege.

You obviously did not read this part of the OP:

Start any arguments between the current system, flat tax, national sales tax or any other tax opinion. The thread is to help people, not debate, flame or troll.

a$$hat.

My applogies, I wasn't trying to attack you or anything. I think it is great the help you are giving people. I just ment people shouldn't take everything here as being gospel.

 

[CPA]

Originally posted by: Accipiter22
OK, so at the beginning of the year I calculated my taxes out based on an assumption of how much I would earn over the course of the year. I didn't want the gov't holding any of it, so I claimed '2' and as such if I had kept the position I was in, I would've owed about $95 in taxes at the end of the year. However I did not keep the job. Over the course of this year I did about 2/3s regular w-2 work, and about 1/3 contracting, 1099 work.. Now my total Gross for the two combined will be less than my beginning of the year estimate.

My question is this: Since I grossed less than I should've over the course of the year, I overpaid for taxes on the 2/3's of my wages that were w-2 based. Will this help assuage the ammount I have to pay on the 1/3 that was contract labor, and was thus untaxed?

Another "Depends" response. If you feel some or most of your contract labor can be offset with expenses, then you stand a good chance. But as much effort you put into the beginning of the year, it wouldn't take much to see what you look like at the end of the year. Most tax software sites have preview versions available. Use one of those and pop in the numbers to see what it looks like.

 

[Homerboy]

Originally posted by: DVK916
Keep in mind people just because someone is a CPA doesn't mean they have any tax knowlege.

Yet ANOTHER thread crap/troll by you DVK916?

 

[CPA]

Originally posted by: DVK916

Originally posted by: CPA

Originally posted by: DVK916
Keep in mind people just because someone is a CPA doesn't mean they have any tax knowlege.

You obviously did not read this part of the OP:

Start any arguments between the current system, flat tax, national sales tax or any other tax opinion. The thread is to help people, not debate, flame or troll.

a$$hat.

My applogies, I wasn't trying to attack you or anything. I think it is great the help you are giving people. I just ment people should take everything here as being gospel.

Understand, sorry for the eruption.

You do make a valid point, one which I have mentioned many times before. I am, indeed, not a tax accountant by trade, but I am confident enough with the code to answer what I know. Otherwise, I would not tread in these waters.

 

[DVK916]

My parents own a "business" and since the creation of this "business" they have reported a net lost income, this "business" is over 10 years old as well.

My question is if my parents get audited one day, how many years back does the audit go.

 

[CPA]

Originally posted by: Jnetty99
Not sure if this is Federal or State.

Went back to school this year, I remember a few years ago i would get credit for any money i spent on school ( up to $2000). Is that still the case, even if you are 25 years old. I work full time and go to school full time.

Federal. Not sure about state.

You can choose either Hope or Lifetime Learning Credit.

Hope Credit is $1500
Lifetime is $2000

There are certain rules and restrictions for both. The biggest factor being Income level.

 

[EagleKeeper]

Originally posted by: gordita
yes, they still have the hope credit and the lifetime learning credit...I forget the difference between the two...

Hope Credit was intended to cover the first two years of post high school educations.
The credit is 50% of what is authorized.

The Lifetime Learning credit is intended for addional learning that does not fall under the Hope. That credit is 20% of what is authorized

The credit does to the primary taxpayer. If you are claimed as a dependant, you can not claim the credit.

For information on what is authorized - search the IRS site for details.

 

[Mayfriday0529]

Originally posted by: EagleKeeper

Originally posted by: gordita
yes, they still have the hope credit and the lifetime learning credit...I forget the difference between the two...

Hope Credit was intended to cover the first two years of post high school educations.
The credit is 50% of what is authorized.

The Lifetime Learning credit is intended for addional learning that does not fall under the Hope. That credit is 20% of what is authorized

The credit does to the primary taxpayer. If you are claimed as a dependant, you can not claim the credit.

For information on what is authorized - search the IRS site for details.

Thank you both,
I claim myself and i'm on my third year of school. i'll look on IRS.

 

[EagleKeeper]

Originally posted by: DaveSimmons
Some radio DJ said something about all cash donations to charities made after August being fully deductible because of Katrina.

1. Is this true?
2. Do you have to itemize (and give up your standard deduction) to claim this?

IRS - Katrina reference

Answer to item #1 NO
Answer to item #2 See #1

However; there is a paperwork reduction and tax benefit for business donating for Katrina.

There is talk ONLY about having charitable deductions no longer fall under the Schedule A for itemization.

 

[CPA]

Originally posted by: DVK916
My parents own a "business" and since the creation of this "business" they have reported a net lost income, this "business" is over 10 years old as well.

My question is if my parents get audited one day, how many years back does the audit go.

Genrally 3 years from the due date to impose penalty and interest. For substantial underreporting, they can go back 6 years. For fraud, there is no limitation.

 

[DVK916]

Originally posted by: CPA

Originally posted by: DVK916
My parents own a "business" and since the creation of this "business" they have reported a net lost income, this "business" is over 10 years old as well.

My question is if my parents get audited one day, how many years back does the audit go.

Genrally 3 years from the due date to impose penalty and interest. For substantial underreporting, they can go back 6 years. For fraud, there is no limitation.

Could having people carry around 30,000 of your iincome be considured fraud. If it is fruad if someone is caught lying about 30,000 worth of income for the past 10 years how serious is this offense.

 

[everman]

Originally posted by: DVK916

Originally posted by: CPA

Originally posted by: DVK916
My parents own a "business" and since the creation of this "business" they have reported a net lost income, this "business" is over 10 years old as well.

My question is if my parents get audited one day, how many years back does the audit go.

Genrally 3 years from the due date to impose penalty and interest. For substantial underreporting, they can go back 6 years. For fraud, there is no limitation.

Could having people carry around 30,000 of your iincome be considured fraud. If it is fruad if someone is caught lying about 30,000 worth of income for the past 10 years how serious is this offense.

I've heard from a CPA friend that the IRS is going to be increasing small business audits since so much abuse happens there and they are training a lot of new personel. Your situation sounds rather grim.

 

[DVK916]

Originally posted by: everman

Originally posted by: DVK916

Originally posted by: CPA

Originally posted by: DVK916
My parents own a "business" and since the creation of this "business" they have reported a net lost income, this "business" is over 10 years old as well.

My question is if my parents get audited one day, how many years back does the audit go.

Genrally 3 years from the due date to impose penalty and interest. For substantial underreporting, they can go back 6 years. For fraud, there is no limitation.

Could having people carry around 30,000 of your iincome be considured fraud. If it is fruad if someone is caught lying about 30,000 worth of income for the past 10 years how serious is this offense.

I've heard from a CPA friend that the IRS is going to be increasing small business audits since so much abuse happens there and they are training a lot of new personel. Your situation sounds rather grim.

I am going to try and convince my parents not to have people carry the income from the side business this year. They are only saving a few thousand dollars doing this and it isn't worth the continued risk.

 

[CPA]

Originally posted by: DVK916

Originally posted by: everman

Originally posted by: DVK916

Originally posted by: CPA

Originally posted by: DVK916
My parents own a "business" and since the creation of this "business" they have reported a net lost income, this "business" is over 10 years old as well.

My question is if my parents get audited one day, how many years back does the audit go.

Genrally 3 years from the due date to impose penalty and interest. For substantial underreporting, they can go back 6 years. For fraud, there is no limitation.

Could having people carry around 30,000 of your iincome be considured fraud. If it is fruad if someone is caught lying about 30,000 worth of income for the past 10 years how serious is this offense.

I've heard from a CPA friend that the IRS is going to be increasing small business audits since so much abuse happens there and they are training a lot of new personel. Your situation sounds rather grim.

I am going to try and convince my parents not to have people carry the income from the side business this year. They are only saving a few thousand dollars doing this and it isn't worth the continued risk.

Good thinking. This is definitely fraud and jail time is definitely an option with something like this for both your parents and the other individuals.

 

[CPA]

Originally posted by: everman

Originally posted by: DVK916

Originally posted by: CPA

Originally posted by: DVK916
My parents own a "business" and since the creation of this "business" they have reported a net lost income, this "business" is over 10 years old as well.

My question is if my parents get audited one day, how many years back does the audit go.

Genrally 3 years from the due date to impose penalty and interest. For substantial underreporting, they can go back 6 years. For fraud, there is no limitation.

Could having people carry around 30,000 of your iincome be considured fraud. If it is fruad if someone is caught lying about 30,000 worth of income for the past 10 years how serious is this offense.

I've heard from a CPA friend that the IRS is going to be increasing small business audits since so much abuse happens there and they are training a lot of new personel. Your situation sounds rather grim.

But most of those will be for revenues of $100k and more.